Gopuff announces layoffs and warehouse closures, citing fears of economic downturn

Gopuff, the Philadelphia-based delivery service that has raised more than $1 billion from global investors as customers increased sales during the pandemic, is closing or combining 76 distribution centers across the country to “prepare for a much more significant macroeconomic downturn . ‘ officials told investors Tuesday morning.

The company is also reducing its global workforce by 10%, according to a memo shared with employees. Gopuff employs around 15,000 people in the US, Canada and a handful of European countries. Tuesday’s cuts follow hundreds of layoffs at Gopuff’s headquarters and management earlier this year.

Gopuff is “among the first” of the country’s fast-growing tech companies to “cut costs” in the current slowdown and has enough cash to weather a recession, according to the memo the company has sent to investors and employees .

Gopuff and other delivery services reported significantly higher sales in 2020 and 2021 as restaurants closed dining rooms and shoppers shunned grocery and convenience stores in response to concerns and restrictions related to COVID-19. As customers returned to restaurants and stores, Gopuff has expanded its online specials, distribution partnerships, and its own brands to continue to grow revenue.

Competitors Uber and DoorDash have lost more than half their stock market value since Jan. 1, a sign investors fear the two larger — but unprofitable — companies are facing sluggish revenue growth and are getting farther from making money to earn. As a private company, Gopuff is not required to disclose its financial results; The company claims it is profitable on an operational basis in key markets without considering financial costs.

Gopuff was one of only a few Philadelphia companies among the Silicon Valley-backed “unicorns” to be valued by investors at over $1 billion. It’s tried to apply smartphone-based apps and inventory management software to an old company — which supplies groceries, branded goods and household items — and use money from tech investors to fuel rapid growth. Valued at up to $15 billion when it last raised capital last year, Gopuff had recruited engineers and managers from across the country to its Spring Garden Street headquarters in recent years in preparation for its rapid expansion.

The company did not release a list of affected sites prior to notifying workers Tuesday. Gopuff has distribution centers in Northwest, West, South and Northeast Philadelphia and in college towns like West Chester, as well as in hundreds of communities across the United States. In recent years, the company has hired warehousemen and workers and contract drivers who work for a stipend and tips, drive their own cars.

Gopuff plans to trim markets where it does little business and focus on larger communities, hoping to limit customer losses to just 5% of its customer base. If successful, it would boost sales per worker as well as operating profits, according to the memo shared with investors earlier Tuesday.

Founded in 2013 by then-Drexel University students Yakir Gola and Rafael Ilishayev, Gopuff has proven it can be profitable in local markets. The company keeps 10 cents for every $1 customers spend in its “top-performing” cities, excluding taxes, interest on loans and other financial expenses, and now identifies the most profitable communities while excluding the underperforming ones.

The company also intends to focus on its most profitable businesses, which include “instant delivery”, ad sales and product sample programs, as well as selling higher-profit “partner” products like Apple consumer electronics. It will expand services in the UK, where Gopuff says it has been particularly profitable since acquiring a service there last year.

Gopuff also expects smaller delivery services to shut down or be sold to larger competitors, reducing competition.

This expectation drew derisive laughter from Victor Tejada, the founder of Philadelphia delivery guys. Tejada says his service, like other locally based competitors, has “strong relationships with solid Philadelphia restaurants” and expects to continue to grow as Gopuff and national services like UberEats and DoorDash struggle to hire recruits while keeping their outside investors happy to deliver.

Gopuff’s main investor is a Japan-based, Saudi Arabia-backed venture fund managed by SoftBank investment group and backed by big Silicon Valley firms like Accel. The company was considering a multi-billion dollar initial public offering (IPO) last year. But the IPO market shrank quickly as traders dumped stocks, particularly speculative retail and technology companies, following the Russian attack on Ukraine and this year’s soaring fuel, food and credit prices.

So the company’s investors will have to wait for their payday: Gopuff has now tightened its belt under the austerity plan, which outlines its strategy “over the next 18 to 24 months,” the memo said.

“We built this company with a focus on profitability first,” Gopuff added in its statement, saying it expects to continue operating “from a position of strength” even after shrinking by 1,500 employees.

Virginia C. Taylor